Salary sacrificing???

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Salary sacrificing???

Postby Mikew on Tue Apr 01, 2008 8:34 pm

Hi guys new to this forum but have picked up a heap of info so far.
I have been quote 8 weeks delivery on a VR DiD with diff lock in platoon green and was wondering what this salary sacrificing is all about, I have heard of it and am not really sure.
Work offered me a company car and I said "just give me the money and I will buy my own" so in reality it is a work vehicle and will be used everyday.
Questions are
1. How much a month should I be getting in lew of a company car.
2. is salary sacrificing better than just getting more money in my wages

Mike
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Salary sacrificing???

Postby slotdownunder on Tue Apr 01, 2008 8:54 pm

G'day Mikew,

Salary sacrificing can potentialy save you $1,000's DEPENDING on your situaton. So please talk to a financial advisor or your accountant BEFORE jumping in.

I'll try and outline some of the basics and if I have missed anything or am not correct the other guys on this forum will help out.

Basically when you salary sacrifice you pay your lease pre tax, this has the advantage of reducing your reportable tax income and depending on your wage could flow onto other benefits as well.

Generally if you do this you can access a commercial fleet price on the vehicle, I managed to save $5000 off the RRP when doing this.

You will also not have to pay GST .

You can also package up fuel and running costs into the deal. Let me tell you walking into a stealership and not have to hand over cash or at a bowser (you would get a fuel card) is a nice feeling.

It is cheaper when compared to borrowing the money from a bank.

It may put you into a lower tax bracket and reduce your tax liability.

You may be able to get all those little extra's (just have a look at how my ute is covered in them) at the time of purchase (or later) and wrap them up as part of the lease.

Also discuss your options for paying FBT. My current lease has a portion of the FBT pad for pretax and some port tax. I'm not an accountant so I don't fully understand why BUT what it means to me is a higher take home pay each fortnight.

Hope that helps a little.

Remember to get advice BEFORE you do anything it really does depend on your own financial situation and it could be possible leasing is more expensive for you.

Cheers

Mal
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Salary sacrificing???

Postby 4wd26 on Tue Apr 01, 2008 8:54 pm

Answer 1.
Money in lew of a company car- depends on the vehicle your entitled to, unlimited kms servicing etc. Base commodore vs Calais?
general range +$10k cash

2. Salary packaging can be better (if your company agrees) as you have to pay tax on the vehicle allowance (so you loose 3k of the 10k straight up) you then have to finance a new vehicle and have it serviced and fuel etc.

Packaging on the other hand means you do the finance before tax.

there is a calculator available on most of the leasing companies websites.
custom fleet leaseplan, these also explain the differences in the leases, and the calculators give realistic variances in the costs (savings).

Depends on the vehicle the company offers as a company car (commodore vs triton), if I would look to do this. i.e. companies risk vs your own.

Cheers
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Salary sacrificing???

Postby Austblue on Tue Apr 01, 2008 9:28 pm

Guys, not to be rude but some of the stuff posted here is misinformation and shouldn't be getting posted as advice.


Mikew, go to your accountant and make an informed decision based on your entire circumstances. There are a lot of different ways to save here and your accountant should know which would suit your situation.
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Salary sacrificing???

Postby jonesy on Tue Apr 01, 2008 10:11 pm

You need to goto your employer first and find out if they will sal sac motor vehicles becuase if they don't your wasting your time going to your accountant.

Most employers will sal sac these days as they get a benefit as well as you and also the lease is portable so if you change jobs the lease and sal sac can be moved to your new employer.

sal sac can save you some money but it's getting less attractive which all the tax cuts of late and will be worst off again after the 1st july when the rates are cut again.

Like has been said you need to look at a lot of variables before thinking about doing this. There's not much benefit unless your earning 50K + per year and your going to do 25K Klms a year.

The FBT is usually divided by 12 and payed with your after tax wages so employers are not trying to work the figures on your expenses they claim to cover your fbt as your expenses for the year will vary. If it's done this way then there's no chance of you getting hit will an fbt bill on 31st March.

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Salary sacrificing???

Postby jonesy on Tue Apr 01, 2008 10:17 pm

I also forgot, if your company is going to give you an allowance your going to be taxed on that as well. Which is again money you lose. If they are going to give you a company car and pay the expenses to run it then I'd be doing that.

Put your money off your home loan, or buy a plasma :)
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Salary sacrificing???

Postby Bubbalucci on Tue Apr 01, 2008 10:25 pm

pay cash and never think about it again
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Salary sacrificing???

Postby jonesy on Tue Apr 01, 2008 10:31 pm

I payed cash for mine. Unfortunately it wasn't my cash 8-)
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Salary sacrificing???

Postby Buzzy on Tue Apr 01, 2008 10:44 pm

What bubba said! ;)
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Salary sacrificing???

Postby Austblue on Tue Apr 01, 2008 11:12 pm

Jonesy,

[quote]I also forgot, if your company is going to give you an allowance your going to be taxed on that as well. Which is again money you lose. If they are going to give you a company car and pay the expenses to run it then I'd be doing that.[/quote]

Sorry mate but this isn't necessarily correct at all. I get paid a car allowance and guess what! I don't pay tax on it! As long as you can show that you're not receiving a fringe benefit then any and all expenses related to owning and running the car are tax deductible!

Difference is that I don't pay 12% like most if not all lease providers charge, I will own the car when at the end of the depreciation period and I can do what I like to it and not worry about keeping the lease company happy!

Many lease companies wont even let you repair the car at their expense without sending a locked quote with justification!
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Salary sacrificing???

Postby jonesy on Wed Apr 02, 2008 1:10 am

How do you show your not recieving a fringe benefit if your salary sacrificing it ? If your leasing the car yourself and you have some arangement with your employer to re-imburse your expenses then yes you could claim them as tax deductions.

Most people that get a car allowance from their employer will have this reflected on their pay slip and group certificate under car allowance which will add to your total income. I'm not sure if this is the type of allowance that MikeW was going to recieve.
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Salary sacrificing???

Postby Austblue on Wed Apr 02, 2008 2:27 am

I don't lease my car I bought it outright.

If you salary sacrifice you will generally pay FBT based on your kms travelled per year. If you want to avoid paying FBT you have to show that all use of the vehicle was work related as defined by the ATO

You're right about the car allowance it shows up as an income then you list your deductible expenses and that value comes off your taxable income.

i.e say joe blow earns 100k p.a and 10k of that is a car allowance but he spends 10k on the car (fuel, depn, interest, tyres, servicing etc.)

Joe blow will be taxed on an income of 90k only.

I get a $15k p.a car allowance and I won't pay tax on it at the end of the year. In fact at my previous company I didn't even get a car allowance but I still (legitimately) claimed the ute's expenses as a deductible expense reducing my taxable income.

IMO salary sacrificing/novated lease pros are:
fleet discount, they manage it all and maybe abn.
Cons: residual payout incl gst, restrictions on repairs and mods, high finance costs (12%vs 8.8%), you can't always transfer the lease it depends on your existing and new company's lease provider, then there's the lease providers which are a pita, you have a certain minimum k's travelled before it is worthwhile, blah blah

end of story is each situation is unique and needs a professional assessment.
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Salary sacrificing???

Postby 4wd26 on Wed Apr 02, 2008 3:02 am

Yep seek professional advice.

The information here is also getting mixed because of the nature of the vehicle being a ute. "commercial vehicle" rules (ATO) differ.

Some of us lease a vehicle for 100% personal use others 100% business.

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Salary sacrificing???

Postby twinturbo007 on Wed Apr 02, 2008 5:05 am

As a business owner and an employee at the same time of the same Pty Ltd company, I have learnt to be restrained at times under self assessment and its various flexibilites until audited. As a previous guest of the audit system that most people never have to endure, I agree with Bubba in regards to paying cash or organising your own personal finance and then depreciating the vehicle. I also think the people suggesting an accountants advice are on the money. No one situation ever is the same and the benefits to each person varies by circumstances.

I sometimes think salary sacraficing benefits are then countered by accountancy costs and the dreaded susceptibility to audit flags being raised.

Personally, I am one for buy the car cash, depreciate it at an acceptable level and claim the travel costs that are relavent by form of a log book or other methods available. That doesnt make it the best way but for me, there is no question the Tax office can ask me that I cant answer simply and without spending loads with my accountant having to be present.
Just my 2 cents worth, maybe even a little off topic but hopefully another point of view.
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Salary sacrificing???

Postby AdrianL on Wed Apr 02, 2008 6:59 am

Visist www.selectus.com.au and you can punch in the dollars and see how it works out.....I am on a lease and works well for me but it really comes down to how many kms you travel per year. The more the better....Not very sustainable for the environment though!!

Cheers

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Salary sacrificing???

Postby andyj on Wed Apr 02, 2008 7:00 am

Hello Mikew
Welcome to the forum and enjoy

If you salary sacrifice make sure you have any mods/add ons done within the initial quote as you can't add to it later and claim back from the salary sacrifice company as any money being paid pre tax is set by taxman, and it is an agreed value at start of lease.
But speak to your employer and see which company they use(if any) then speak to a financial consultant to clarify the small print.
If you get it then make it a fully novated lease, this covers servicing/fuel/tyres etc.
I found out that I couldn't claim the suspension upgrade afterwards as itadds value and is not covered by the tax legislation.

Andy
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Salary sacrificing???

Postby AdrianL on Wed Apr 02, 2008 7:03 am

Hey Andy

I paid for the aftercare products after purchase which wasn't included in the lease package....Do you know if I can claim this at tax time???? Could you do this with your suspension upgrade?

cheer

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Salary sacrificing???

Postby trytin on Wed Apr 02, 2008 7:40 am

Hi here is my situation. Had a 94 MJ in garage brand new condition only had 90,000km and I was doing 1500/yr in the last few years. HAd a company car full use no limits no costs. Sold the MJ for $12K and put the money on the morgage in advance so there if I needed it. Went on car allowance for $16500/yr. Got a new ML GLX-R dual cab DI with $6,000 discount by supplying a letter from my company. You can also get it by joining Big 4 caravan parks for $45. Also remember if the dealer is not giving you $6k discount its because he is trying to pocket the difference. Got a lease at $780 mth $17k payout after 4 years. All that can be varied to suit you. Supplied a tax with holding form to ATO http://www.ato.gov.au/individuals/content.asp?doc=/content/33886.htm
declaring 75% buisness 25% private use ( includes driving to office and back home ). So now I only pay tax on the 25%. Did a log book for 3 months showing my private/buisness use which ATO accept for the next 5 years. SO I get $1377/month after tax less around $600/ mth for fuel, Maintenance, rego ect. ML has 5-10 year warranty so no nasty surprises during lease period. However if it did cost me more than I got in car allowance for the year you can claim the tax back on the extra you spent - with receipts.
I didnt do this excercise to make money although I may well do. For me it was a way to get a new 4x4 and possibly every 4 years get a new one at no extra cost to me. If I work it out the old ute probably cost me $1500-$2000 year to keep and run so add this amount to your car allowance figure when doing the calculations.
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Salary sacrificing???

Postby triton06 on Wed Apr 02, 2008 10:41 am

you shouldn't get charged fbt as the triton is fbt free, this is the main reason i bought the triton. i was advised this by my accountants. certain models of the navara and hilux are charged fbt.
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Salary sacrificing???

Postby Dallas on Wed Apr 02, 2008 11:37 am

I have salary sacrificed my Triton using the FBT Exemption criteria to escape any FBT liability.The Exemption Criteria are very specific however so you need to ensure you are sure you can meet the criteria (and survive any ATO scrutiny) before going down this path.In a nutshell, the criteria specifies that to qualify for the exemption any private use (other than travel to and from work) must be'minor, infrequent or irregular'. They give an example of this as being 'occasionally taking rubbish to the tip'.If you are audited and the ATO deem you have claimed the exemption when in fact you do not qualify then FBT WILL APPLY, which may result in FBT liability totalling several thousand dollars (payable by the company).Many companies will not take the risk with the exemption and insist that FBT will be applied to the vehicle regardless of whether or not you think you can satisfy the requirements just in case they might be left holding the bag so to speak in the event of an audit.

If you go down this path, do your homework, be prepared, and make sure you can produce evidence to back up your 'no private use' claim (ie: keep a log book for 3 months) in the event you are audited.

8-)
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Re: Salary sacrificing???

Postby muhsarim on Tue May 24, 2022 1:02 am

Its old information but stil help me. I am planing to buy new triton on salary sacrificing. Does this is good idea or i should go for allowance etc. How much difference in price?
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Re: Salary sacrificing???

Postby NowForThe5th on Tue May 24, 2022 5:42 am

muhsarim wrote:Does this is good idea


As above, it depends on your circumstances. Best advice is to talk to your accountant. ;)
Chris

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